- The scope of the fund management exemption
- The extent to which value added tax (VAT) interpretations ought to follow definitions drawn from other areas of law and regulation
- How EU exemptions ought to be applied in practice
The Advocate General stated that sub-delegated investment advisory services can qualify for VAT exemption on the basis that they fall within the meaning of “fund management”—regardless of the facts that responsibility for implementing a strategy is not delegated and that these services are not listed as an aspect of management in the UCITS Directive. GfBk Gesellschaft für Börsenkommunikation mbH v. Finanzamt Bayreuth, C-257/11 (9 November 2012)
Read the Advocate General’s opinion: GfBk
A German investment manager provided various services to its clients, being fund managers, and made buy-and-sell recommendations within certain parameters set by the manager.
While responsibility for reviewing and approving those recommendations was retained by the manager, it effectively “rubber-stamped” these (often within minutes), only rejecting the recommendation if it breached agreed rules. The manager did not undertake a separate asset selection process and did not have capacity to do so.
The Advocate General found that the services would be VAT-exempt. In reaching this conclusion, the Advocate General argued that limiting “management” solely by reference to functions listed in Annex II of the UCITS Directive (85/611/EEC) was too restrictive, particularly given that Article 5 of that Directive states that Annex II is “not exhaustive.”
The GfBk case (once judgment is issued by the CJEU) is expected to clarify the extent to which delegated fund management services can fall within the relevant exemption.
The questions referred to the CJEU focus on whether an “advisory” service (i.e., when the provider does not have a specifically mandated role) can fall within the meaning of “management” and, therefore, be a VAT-exempt fund management service.
Read reports on the Advocate General’s opinion, prepared by the KPMG member firms in the United Kingdom and in Luxembourg: